Nymex natural gas futures were trading down sharply after the U.S. Energy Information Administration (EIA) on Thursday reported two weeks’ worth of natural gas storage data that landed bearishly outside expectations. EIA reported a net withdrawal of 6 Bcf of natural gas from storage in the week ended Nov. 3, lower than expected, and an injection of 60 Bcf in the week ended Nov. 10, which came in above estimates.
At A Glance:
- BREAKING: U.S. EIA reports double bearish print
- Forecasts solidify colder late November views
- Output presses pedal again
Natural gas futures jumped Wednesday as traders looked ahead to below-normal temperatures for most of the country in late November and a rare double dose of weekly government storage data Thursday.
The December Nymex natural gas futures contract rose 8.4 cents day/day to settle at $3.190/MMBtu. January gained 4.6 cents to $3.362.
NGI’s Spot Gas National Avg. slipped 1.0 cent to $3.045, as gains in California, the Rockies and Texas were offset by declines in the Midwest, Appalachia and Northeast. South Central production tumbled Tuesday, sending supportive ripples across western gas markets that continued to be felt Wednesday.
Permian Basin production, which accounted for a good portion of Tuesday’s output drop, held lower around 16.8 Bcf/d on Wednesday, Bloomberg estimated. Total production stood at 103.4 Bcf/d Wednesday, Bloomberg estimated.
Elsewhere on the bullish front, forecasts shifted colder overnight and became more consistent calling for below-normal temperatures in the East and the Midwest Nov. 25-Nov. 29, Maxar’s Weather Desk said.
Bulls would welcome the chill after futures bled all of last week under the weight of an unseasonably warm stretch of weather and weak demand forecasts. But since Friday, those outlooks have taken on a darker shade of blue, first with a cold shot across the Northeast this weekend, then a wider swath of winter hitting after Thanksgiving.
The stretch of red for futures was driven by fears that a warm November could be a prelude to a warmer-than-normal winter, influenced by a strong El Niño weather pattern, but “has all of that rumor been sold, so to speak?” East Daley Analytics analyst Jack Weixel told NGI.
Some would say prices are “still stubbornly high” with production at record levels and weather not providing much support, he said. “Have markets sold off enough? Or is there more to come? Or maybe it chops sideways for a little while.”
EIA Doubleheader
The next big catalyst for answering those questions was Thursday, when the EIA was scheduled to release storage prints for the weeks ended Nov. 3 and Nov. 10, both at 10:30 a.m. ET. A scheduled outage delayed the former last week.
The week ended Nov. 3 saw the season’s first taste of winter and as a result could show the first withdrawal. NGI modeled a 9 Bcf withdrawal for the week ended Nov. 3. Estimates submitted to Reuters ranged from a withdrawal of 20 Bcf to an injection of 21 Bcf, with the median landing at a withdrawal of 7 Bcf. These estimates compare with a five-year average 36 Bcf injection and a 83 Bcf year-earlier build.
For the week ended Nov. 10, NGI is modeling a storage injection of 43 Bcf. That compares with a five-year average 20 Bcf injection and a year-earlier injection of 66 Bcf for the week.
A Reuters survey found analyst estimates ranging from a withdrawal of 20 Bcf to an injection of 67 Bcf, with a median of an injection of 42 Bcf. Bloomberg’s poll spanned estimates for injections from 33 Bcf to 49 Bcf and landed at a median of a 42 Bcf build. A Wall Street Journal survey produced an average of a build of 34 Bcf.
Analysts at Mobius Risk Group said they are watching to see what the net build or decline will be for the two weeks. “A net change of anything less than +50 Bcf would be supportive on a weather-adjusted basis as the same two-week period last year saw a net change of +150 Bcf,” the firm said.
That noted, the analysts said the risks still lean to oversupply this winter. “The 800-pound gorilla remains weather risk associated with El Niño conditions in the equatorial Pacific. Additionally, there will likely still be a 200 Bcf storage surplus to work off even after this week’s EIA data, with such a quantity amounting to 1.25 Bcf/d of extra supply available to the market this winter.”
EBW Analytics Group analyst Eli Rubin echoed that bearish slant and took the surplus math further. If the higher run-rate for production lasts through the winter, it could swell that surplus to an extra 500 Bcf of supply for the season, he said.
“The startling expansion of more than 3.0 Bcf/d of dry gas production in two months continues to reset the natural gas market outlook in a bearish direction,” he said. While key variables remain like the path for winter weather, an extra 500 Bcf of supply “may sap upside potential and bias price risks lower.”
Spot Market Prices
Next-day cash prices were mixed Wednesday as tighter Texas supply lifted spot levels in California and the Rockies, while mild weather drove declines across other regions.
Southern Border, PG&E led all gainers, rising $1.195 day/day to average $5.745. Meanwhile, SoCal Citygate saw its premium to the SoCol Border Avg. further chopped down. SoCal Citygate on Wednesday fell 23.5 cents to $6.985, while the SoCal Border Avg. rose 66.5 cents to $5.945. The premium drew fire from buyers this month after it rose above $4.000.
In the Rockies, Northwest Wyoming Pool rose 66.5 cents to $6.310. In Texas, prices mostly rose, with declines mostly in the eastern and southern areas. Waha rose 21.0 cents to $2.350.
Those gains were offset by declines in the Midwest, Appalachia and Northeast where mild weather is keeping a lid on demand.
With much of the country enjoying warmer-than-usual temperatures this week until Friday, power demand remains below seasonal levels and is undercutting prices across the middle and eastern portions of the country. The weakness was most pronounced in the Northeast on Wednesday, where Iroquois Zone 2 fell 21.5 cents to $2.600. In Appalachia, Tennessee Zn 4 Marcellus shed 12.0 cents to $2.070.
In contrast to the dominating mild conditions, southeastern Florida is under a flood watch until Thursday because of heavy rains that started Tuesday, and now with a remaining moderate risk of excessive rainfall, the National Weather Service said.
By the weekend, that same storm could bring heavy rain to the rest of the East Coast, with brisk and chilly air behind it descending from Canada across the Midwest, Accuweather senior meteorologist Alex Sosnowski said. The East should dry out on Monday, but then cold air is expected to push south into the South Central states ahead of Thanksgiving, he said.
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